Payroll and Pensions Guide

What is Payroll?

Payroll is the process of paying a company’s employees, which includes tracking hours worked, leave, calculating their pay and distributing those payments to the employee’s bank account. It can also be one of the most daunting aspects of a business owner. There are several things you need to get right, from National Insurance contributions, benefits, tax and pension deductions. This is processed via PAYE, HMRC’s system for collecting Income Tax and deductions from employment. As an employer you’re responsible for paying an employee’s tax to HMRC via PAYE.

Payroll Software

If you are new to payroll we can help. Not only do we have a dedicated team to carry out all aspects of payroll, so you can sit back and relax knowing all your employees will be paid the correct amount and on time.

Forms

If you employ staff, you need to be made aware of the following forms:

P60 – end of the tax year

P45– when they stop working for you.

P46 (Car) if you start or stop providing a car for private use.

P11D – report expenses or benefits provided to employees at the end of the tax year

P32– Employer Payment Record. This is a summary of all payments made to HMRC per month in the tax year.

HMRC Starter Checklist

P11D Form

If you have supplied expenses or benefits to your employees, you will need to submit a P11D form to HMRC each tax year. Examples of the benefits include: Private medical insurance, relocation expenses, subscriptions (gym memberships etc), company car and vans, vouchers.

New employee

When hiring a new member of staff, you must check they have the legal right to work in the UK. You must supply a written employment contract stating if it a Full time, part time or freelance contract and their holiday allowance.

Before the start date

PAYE reference number – This needs to be applied for as soon as you take on your first member of staff or sub-contractor

When you employ a new member of staff or subcontractor you must inform HM Revenue and Customs to receive your employer PAYE reference number. You receive this within 5 working days.

You will need to ask the employee for their NI number, Date of Birth and Address (see HMRC Starter Checklist)

Ask employee for P45 from previous employer

You will need a P45 to find out their previous tax code and to see if there are any student loan deductions that should continue. If this isn’t available an emergency tax code will be used until notified by HMRC.

Making payments

You must ensure that all employees are being paid at least the minimum wage.  If required Statutory Maternity Pay (SMP) and Statutory Sick Pay (SSP) should be calculated and paid to the employee.

Holiday Pay

ALL employees are entitled to holiday pay, there are various ways of calculating and providing this

Workplace Pension

If you are an employer, it is a statutory requirement to enrol all eligible staff into a workplace pension. You must write to tell your employee, the date, the type and how this will be contributed from both parties. Employees will automatically be enrolled if they are: a) classed as a ‘worker’ b) aged between 22 and State Pension age and c) earn at least £10,000 per year and usually (‘ordinarily’) work in the UK (read the detailed guidance if you are unsure).

Payslip

You must supply a payslip to your employees which shows all the deductions made from their gross pay. If payments are made based on hours worked this must be shown on the payslips.